Q: May I suggest an article for an upcoming column: “Singles Retirement.” There are large numbers of us singles out here nearing retirement. We have only one Social Security check and most have no pension. What steps can we take? Should we relocate to a cheaper area or stay near family? Many of us live in apartments, so downsizing is really out of the question.
A: Like the rest of life, much of retirement as a single depends on how adaptive you are. While downsizing may be a “done deal” for many single retirees, my reader mail indicates that the biggest decision — and biggest opportunity — most seniors have is about shelter. Many have much-needed equity trapped in a home or condo that is larger than what they want or need.
When it comes to where you live, family usually trumps shelter economics — unless family can be part of the economic solution. There is nothing wrong with extended families living in the same house, and many families would benefit by sharing shelter.
This applies to friendships, too. While living with a stranger to save money would probably be a hardship for most people, it’s hard to complain about sharing with good friends. Two can’t live for the price of one, but they can certainly live for less than the price of two living separately. The savings can go well beyond shelter. Think about transportation, telephone, cable, Internet service and food as well.
One of the best places I’ve found to observe different shared living arrangements is RV parks. There, sharing often evolves as an enjoyable communal activity, whether it is sharing a car for shopping, putting together a potluck supper or helping someone who is ill. A small amount of money can go a long way.
Would such arrangements be as good — and as funny — as The Golden Girls TV series? No, probably not. But it has a lot more going for it than living alone.
When I wrote “How to Survive on $15,000 a Year” in 2008, many readers responded with anger. They said the idea of sharing with another person was repulsive. I think that’s wrong-headed. Very few people aspire to live in isolation. Most hope for communication and companionship.
Q: I’ve heard a lot about no-load mutual funds. It seems to make sense that it would be best to make money with a financial planner who charges a percentage of total assets, recommending no-load mutual funds, as opposed to a broker who charges a percentage on each trade and recommends funds that have front- and back-end loads making regular changes. Is it reasonable to guess that in the case of the broker, it would take super performance of the funds in order to break even after you factor in the fund costs and loads?
A: The answer here is maybe, or maybe not. But you are more likely to get advice that is not biased by a need for commission-generating transactions if you pay a percentage of assets each year. That said, a commission-based relationship could, over time, work to your advantage. Let me give you an example:
The American Funds group offers funds with very low annual expense ratios through a traditional brokerage commission arrangement. The selling broker gets an upfront commission and an annual trailing fee (the 12b-1 fee) that is about one-fifth of the 1 percent fee charged for typical asset-based fee arrangements.
Sadly, the American Funds group has been in net redemption — people redeeming more shares than they are buying. One reason may be the growth of aggressively sold brokerage-based “wrap” accounts that are likely to cost two to three times as much as an American Funds portfolio.
So while the broker may be paid a 5 percent commission up front, it can be recovered fairly quickly when measured against a wrap account with total annual expenses approaching 2 percent. How this actually works out also depends very much on the expenses of the underlying funds. If your commission-based funds have annual expense ratios that are lower than the funds chosen by the asset-based fee broker, your long-term cost advantage can be substantial.
The bottom line here is “it all depends.”
Questions about personal finance and investments may be sent by email to firstname.lastname@example.org.